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The State of the Internet

The Mozilla Internet Health Report is packed with interesting statistics about the state of the Internet. Reports like this one remind us that broadband is a worldwide issue that is much larger than the US broadband industry I write about every day.

The report contains a lot of interesting facts:

  • A little more than half of the planet is still not connected to the Internet. As a planet, we still have a long way to go. While the largest percentage of a region still not online is in Africa, by sheer numbers, most of those still not connected are in Asia.
  • Worldwide, men are 21% more likely to be online than women.
  • Much of the world connects to broadband through cellphones, and the cost of broadband is a huge issue in many parts of the world. In Middle Africa, a gigabit of cellular broadband costs almost 12% of the average monthly income. In Western Africa, it’s over 8% and in Eastern Africa, it’s over 7.4%. Closer to home in Central America it’s 4%.
  • Much of the world can’t afford smartphones. For example, in Sierra Leone it takes six months of an average salary to buy a smartphone. In India it takes 63 days of the average salary.
  • Seven of the top ten largest companies in the world, by market capitalization, are Internet companies – Apple, Microsoft, Amazon, Alphabet (Google), Facebook, Tencent, and Alibaba.
  • Five of those companies – Amazon, Microsoft, Alibaba, Google, and Tencent – control 80% of all of the cloud traffic in the world, meaning that most other web applications run through these companies.
  • Four of the top six social media platforms, in terms of users are owned by Facebook – Facebook, WhatsApp, Facebook Messenger, and Instagram.

The report also contains many stories about some of the negative aspects of the web. A few include:

  • The states of Rakhine and Chin in Myanmar have been blacked out from Internet access for over a year. Governments routinely block Internet access as a way to punish or control people. In addition to these two places, there was at least one other place in the world with blocked access every day in 2020.
  • 2020 might go down as the year when Internet disinformation was weaponized with governments all over the world using social media to spread propaganda.
  • The pandemic magnified the extent of the digital divide across the world. In many parts of the world, the education systems have effectively shut down for rural and poor urban students.
  • Government data has been hacked. A good example is a hack in Chile where over 19 gigabytes of citizen data including passwords and personal identifying data was stolen.
  • There are practically no binding guidelines anywhere in the world that set limits or define ethics for the newly developing artificial intelligence technology.

Of course, there are also positive things happening with the Internet:

  • In the US and Europe, there is a major push to tackle antitrust abuses by the largest web companies.
  • Europe is leading the world, but others are catching up in creating rules to enforce consumer privacy.

It’s easy to forget that the web only became a real thing in the mid-1990s. While there are clear problems associated with the web, it’s also amazing that in a little over 25 years we’ve connected half of the people on the planet.

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Current News The Industry

The Need for Training Telecom Technicians

Eleven different industry trade associations have written a joint letter to Congress and the new administration asking that any new infrastructure funding include training for telecom technicians. I can’t recall a time when so many associations aligned like this on any issue.

The letter included support from the Competitive Carriers Association (CCA), the Fiber Broadband Association (FBA), INCOMPAS, NATE: The Communications Infrastructure Contractors Association, NTCA – The Rural Broadband Association, Power & Communication Contractors Association (PCCA), the Telecommunications Industry Association, USTelecom – The Broadband Association, the Wireless Infrastructure Association (WIA), the Wireless Internet Service Providers Association (WISPA), and the CTIA.

The letter says that the industry expects to create 850,000 new technician jobs by 2025 to support wireline and wireless deployments. To put that number into perspective, the industry currently employees 672,000 technicians with an average salary of $77,500. The industries also collectively expect to add another 2.1 million jobs to support the new industries like 5G and new fiber ISPs.

The associations are asking for the federal government to expand existing apprenticeship programs and create new ones that combine class learning along with field experience. There are some such programs in the country, but nearly enough to handle the upcoming needs of the telecom industry. To letter asks that in order to promote diversity that training programs be established at Historically Black Colleges and Universities and Tribal Colleges and Universities along with community colleges, public universities, and other institutions.

The industries suggest that training institutions form public/private partnerships with the industry to help develop the programs in a timely manner and to make sure that training is covering state-of-the-art technologies and techniques.

We are not currently prepared to double the number of fiber technicians – but we’re going to have to find a way to do it. There are some formal training programs for fiber technicians, mostly being done by trade schools or technical colleges that sponsor apprenticeship like the CFOT or CPCT certification process sponsored by the Fiber Optic Association. But the majority of fiber technicians today are trained on the job with new employees starting as hands-on journeymen.

I’ve written about this issue before. We’re facing a shortage of technicians for several reasons. First, the large telcos have been downsizing technician workforces for the last two decades, meaning they did not train a lot of new technicians. These big ISPs have historically been the primary drivers for training new technicians. Unfortunately, this also means that a lot of the technician workforce are baby boomers who are now retiring, causing additional shortages.

We must find a way to make this happen or the wireless and broadband industries will be forced to cut back on expansion plans. We’ve been building fiber and new small cell sites at a furious pace for the last few years and are likely to continue to do so as long as we have the technicians needed to construct the new networks and to maintain them after they are built. Fiber and wireless technicians are the kinds of solid middle-class jobs our economy needs and hopefully, we can kick training programs into high gear in a hurry.

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Trying to Understand the RDOF Grant Awards

I live in North Carolina, and in the last few days, I heard a few things about the RDOF grant awards that I found to be disturbing. First, a state politician is claiming that the RDOF awards are going to take care of the rural broadband problems in the state, so there is no longer any reason for the state to be looking at broadband solutions. I also heard from a few county broadband groups who are wondering if they still have a role to play in seeking better broadband.

I had not previously analyzed the North Carolina RDOF winners, so this set me off to gather the facts. The following is what I found about the tentative RDOF awards in North Carolina. I say tentative because the FCC still has to approve each recipient and award and the FCC just recently received the long forms that start the review process.

  • North Carolina has tentatively been awarded $166.6 million in grants, to be paid to grant winners over 10 years or $16.66 million per year.
  • The grants cover 155,137 households in North Carolina or roughly 350,000 people. In a state with 10.5 million people, the grants propose to bring improved broadband to 3.4% of the people in the state.
  • The RDOF grant works out to $1,074 per household.

Here are the RDOF winners in North Carolina:

  • Charter – $142.1 million
  • Starlink – $17.4 million
  • Windstream – $4.2 million
  • Wilkes Membership Cooperative – $1.3 million
  • Co-op Connections Consortium – $721,000
  • CenturyLink – $530,000
  • Mediacom – $304,000
  • Connecting Rural America – $33,600
  • Carolina West Wireless – $460.

Charter is the big winner, taking over 85% of the RDOF award in the state. Starlink got over 10% of the award in the state, and everybody else combined got a little less than 5%.

Recall that RDOF was only awarded in places where the FCC broadband maps say that broadband speeds are less than 25/3 Mbps. In the latest FCC broadband report to Congress, just released in January of this year, the FCC claimed that 456,000 people in rural North Carolina don’t have broadband – and the RDOF only covers one-third of those folks. But we also know that the FCC mapping data is full of problems. The State of Georgia undertook an analysis of the FCC mapping and determined that the number of homes in Georgia without broadband is twice what is claimed by the FCC. It’s hard to know the actual number of people in North Carolina without 25/3 Mbps broadband, but it has to be a lot more than 456,000.

The most troublesome aspect of the RDOF grants in the state is the average award of $1,074 per household. This might be adequate for Starlink if they provide a free receiver for customers (not known if they will do that), but this doesn’t come close to building the technology promised by Charter. Charter has promised to build gigabit infrastructure and that means building either a traditional HFC (hybrid fiber/coaxial) network or fiber. The RDOF grant is bringing broadband to some of the most rural places in the state. As a point of comparison, I’ve analyzed several rural counties in Minnesota recently that have perhaps the lowest rural construction costs imaginable – and the all-in costs in those counties were at least $6,600 per passing. It’s not hard to guess that the costs in rugged Appalachia could easily be as much as $15,000 per passing. Charter has pledged an additional $3.8 billion in equity to match the RDOF funds, meaning $5 billion in total budget. Nationwide, Charter won the grants to cover 1.06 million homes, meaning they have set aside funds of about $4,727 per passing. I have trouble envisioning that Charter has enough money to bring gigabit broadband with that budget.

There are other troubling aspects of the RDOF grants. There have been technical concerns raised recently about the ability of Starlink to meet both the build-out deadlines and the speeds promised for RDOF. In North Carolina, a lot of the Starlink funding is going to Appalachia, and there is a concern about the ability of homes in the mountains and woods to get the needed view of the horizon to see satellites.

Perhaps the biggest downside to the RDOF grants is that grant award winners have six years to build the promised solutions. That’s a long time to wait for households that are hurting without broadband today. And it’s a really long time to wait if some of the RDOF homes never get the promised broadband.

Unfortunately, the facts in a lot of states probably look similar to North Carolina. This has prompted widespread warnings from members of Congress and from various telecom associations that the RDOF awards are troubling. But even if the award winners can somehow reach every pledged home for the grant money as awarded, we know that the RDOF grants will not alone solve the rural broadband problems in North Carolina. Local broadband committees need to keep pressing ahead to find broadband solutions. Politicians can’t use the partial solution brought by RDOF as cover for not supporting broadband solutions.

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How Good is Low-Income Broadband?

The two biggest cable companies, Comcast and Charter, have taken lots of public bows this year talking about how they are making sure that homes with students have affordable broadband during the pandemic.

Comcast is serving low-income students with its Internet Essentials product. This product is available to homes that are eligible for the National School Lunch Program, Housing Assistance, Medicaid, SNAP, and SSI. The low-income program got its genesis in 2011 as a requirement for the Comcast acquisition of NBC Universal. The company reluctantly offered the product at first, but after growing to 2.6 million households by 2013, the company decided to keep this as a product.

At the start of the pandemic, Internet Essentials offered speeds of 15 Mbps download and 2 Mbps upload. In March 2020 Comcast increased the speeds to 25/3 Mbps. The company worked out deals with some school systems to provide a few months of the product for free. Comcast recently announced that it will increase the speed of the product to 50/5 Mbps on March 1. Comcast recently reported that it has over 8 million households using the product.

Charter has a similar product called Spectrum Internet Assist that delivers 30/3 Mbps for $14.99 with a WiFi router for $5 per month. During the pandemic, Charter has offered qualifying new subscribers two months of free service for any internet product up to 100 Mbps.

A recent article in BuzzFeed documents how students have been pushing back against Comcast, which may have been part of the impetus to increase speeds for Internet Essentials. The article tells of a family with only two students that were unable to both work on the Comcast connection at the same time. The Internet Essentials product is good enough for one student, but not two.

Comcast has been pushing back on criticism of Internet Essentials all year saying that the 25/3 Mbps product is adequate because it meets the FCC’s definition of broadband. But the fact that the company will be increasing the speed to 50/5 Mbps shows that the company recognizes that 25/3 Mbps is not adequate broadband for many households.

This raises the bigger question of how best to provide broadband to low-income homes. While the two programs from the cable companies are inexpensive, they also provide inferior broadband. It feels like the companies are punishing households for not having enough money for a full subscription.

For example, consider the low-income broadband product at EPB in Chattanooga, the municipal broadband provider that delivers over fiber. EPB offers a low-income product of 100/100 Mbps for $26.99, less than half of normal broadband priced at $57.99. This is the identical product delivered to customers paying the full price. The City would like to offer the product for a lower price, but Tennessee law prohibits municipal broadband systems from offering a subsidized product.

The real problem that families are having with the cable company broadband products is the slow upload speeds. Limiting upload speeds to 3, 4, or 5 Mbps is inadequate for students trying to function from home or adults trying to work from home.

During this last year of the pandemic, we have done surveys in a number of cities where households are struggling with the normal cable upload products that have upload speeds between 10 Mbps and 20 Mbps. In the four cities we’ve most recently surveyed, about one-third of households say that their cable broadband product is not adequate for working or schooling from home.

The cable companies face a huge dilemma. They know the upload speeds on their network are inadequate. They also know that fixing the problem is going to incredibly expensive. At a minimum, a cable company would have to undertake what is knows as a mid-split to bring the faster upload speeds to something faster like 50 Mbps. The mid-split option has been available under the DOCSIS 3.1 standard, but few cable companies upgraded the upload portions of networks. The even more expensive upgrade to DOCSIS 4.0 will be available in a few years to bring symmetrical bandwidth.

Since cable networks are already overloaded, it’s clear that the cable companies don’t want to provide full bandwidth to customers that aren’t paying full price, so they are treating low-income subscribers as second-class citizens. Perhaps they should look at the EPB example and charge more. Why not also offer a $30 product that has better upload speeds?

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Let’s Bring Telecom Manufacturing Back to the US

President Biden recently signed an executive order that will require that the federal government buys more goods produced in the United States. This was done to promote American jobs and to keep profits at home. It’s a great idea, but it suffers from one big flaw – we don’t manufacture a lot of things in the US anymore. Statistics are hard to pin down, but something like 40,000 US factories have shut down over the last decade.

We’ve tried to implement this rule with telecom before. The American Recovery and Reinvestment Act of 2009 funded billions in fiber projects. One requirement of those grants was that newly built networks had to buy American whenever possible. I worked with clients who tried to find American electronics to no avail – they largely did not exist. Even the electronics made by US manufacturers were all built overseas.

It’s time we have a serious discussion about bringing telecom manufacturing back to the US. We learned during the pandemic that the US is totally dependent on other countries for basic goods – countries that in many cases are not our allies.

And a lot has changed since we’ve shipped electronics manufacturing overseas. Consider if we wanted to start manufacturing fiber ONTs in the US. This is the device that terminates fiber to a home or business. US ISPs are likely to buy a hundred million such devices over the next decade, not counting the demand in nearby Canada and Mexico. That is more than enough demand to justify building a US factory to make these devices. Even more basic than ONTs is fiber lasers – is there any reason we can’t build fiber lasers in the US?

The most important change that can reinvigorate US manufacturing is robotized factories. A modern factory can compete in cost and efficiency with the lower labor costs in places like Wuhan Province, China, where a lot of the ONTs are manufactured today. Where an older factory making ONTs in the past might have had thousands of jobs, a robotized factory might have only have 500 jobs – but good-paying technical jobs.

We know this idea can work because we see it in action. Germany decided a long time ago that it needed to keep manufacturing jobs at home, while also paying good wages. Germany passed legislation that encouraged manufacturing at home. This meant tax breaks for factories. It also meant big penalties for companies that used foreign goods when domestic ones were available.

It may turn out that we can’t make an ONT for $100. But our economy is is far better off if we can make one for $110 or $120 and if we buy all of the ONTs from a supply chain wholly inside the US. However, I’m betting that our smart engineers can design an efficient factory that can meet and beat the cost of overseas ONTs.

What is needed to make this happen is the will to do so. We need changes in laws that heavily favor using US manufacturing and that reward owners for building modern robotized factories. There are tens of thousands of empty factories around the country and communities that will welcome new manufacturers with open arms.

It’s one thing to issue a call to buy American. I can remember a similar government rule several times during my career. What’s needed instead is a government call to move US manufacturing back to our shores. We have the smart technical people who can make this happen and we have a lot of workers eager to return to good-paying factory jobs. I hope that ‘Buy American’ finally becomes more than a feel-good slogan.

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Solving the Urban Digital Divide

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We suddenly have a new way to tackle the urban digital divide. The Consolidated Appropriations Act of 2021 allocated $3.2 billion to bring broadband to homes that need it during the pandemic. Further, a recent editorial in the Washington Post suggests that we expand this program and make it permanent. I have conflicted feelings about the plan.

It’s wonderful for the federal government to finally recognize that there is a huge digital divide in urban America. The FCC has rightfully concentrated its effort on rural homes that have no broadband option, but this means there is barely any official acknowledgement that an urban digital divide even exists. Finally recognizing the issue is a great step towards starting the process of finding permanent solutions to the problem.

This feels like the absolute right solution for 2021 while we are still under the pandemic. The proposed solution would pay $50 for a home broadband connection for homes that need it. There are still millions of homes with students struggling with schooling from home and millions more were sent home to work. Broadband is also essential for the millions who have lost jobs during the pandemic. $3.2 billion will pay for broadband to 10 million homes for six months or 20 million homes for three months. I wonder if anybody even knows how many homes need broadband right now – I’m guessing it’s far more than 10 million.

But I can’t help feeling like this is a big giveaway to the biggest ISPs which are likely to claim most of this money. It’s impossible for Washington DC outsiders to understand where ideas like this came from. I’d feel better about this idea if it came from digital divide advocates than if this idea was hatched by big ISP lobbyists who see a way to snag billion in federal money.

That’s a legitimate concern because this plan largely ignores the other two issues faced by homes without broadband. Many such homes don’t have a computer and many people don’t know how to use computers. Urban digital divide proponents will tell you that we need to solve all three issues before a home can meaningfully take advantage of getting broadband.

I also hope that any money used this way goes towards real broadband. It will be maddening if Comcast can charge the federal $50 monthly for what it already provides with its $9.95 Internet Essentials program. Comcast has crowed loudly about the good done by this program, but Comcast recently announced it is upgrading the program for 25/3 to 50/5 Mbps – a speed that is still inadequate for multiple people to use at the same time. I thought that was a decent program before the pandemic, but it no longer delivers what a home needs to stay connected during the pandemic.

I also hope that none of this money goes to AT&T DSL since the company stopped offering DSL to the public in October. None of this money should go to DSL in general since most DSL connections have upload speeds even slower than the Comcast Essentials.

I have reservations against making this a permanent solution. I might be wrong about this and perhaps I can be convinced that this is the best solution for the urban digital divide. I can’t help but wonder about what happens the day this subsidy ends and millions of homes lose their broadband connection. Perhaps the big ISPs already envision that day and know the temptation will be for the government to continue funding the program endlessly. My other big concern is that if this is made permanent that it will always be an annual target for politicians to eliminate.

My gut tells me that billions could be better spent by building a permanent broadband solution for poor urban neighborhoods. Before we make $50 payments into a permanent solution, as has been proposed by the Washington Post, I’d like to at least explore using federal funds to create urban broadband cooperatives or non-profit ISPs that could bring permanent broadband to neighborhoods that most need it. We already have a great historical example of how this can work. Rural America basically got electricity because the federal government loaned money to cooperatives to build electric networks. My guess is that we’d see the same thing happen in urban America if the government offered the oans. It makes a lot more sense to loan the money needed to let neighborhoods help themselves than to create a permanent subsidy.

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The Consolidated Appropriations Act of 2021

The headlines claimed that the most recent $900 billion COVID-19 relief package includes nearly $7 billion in funding for broadband. That is a lot of money and is one of the biggest awards ever aimed at broadband. Following in my first impressions about the usefulness of the funding.

Replace Chinese Electronics – $1.98 billion. Over a quarter of the funding is being used to ‘rip and replace’ electronics from Huawei and other Chinese manufacturers. This money doesn’t bring any broadband benefit, so it’s disingenuous to call this broadband funding. I’ve wondered about this concept from day one. Network engineers tell me that it would not be hard to firewall this equipment and eliminate any risks that such equipment is spying on us – so this feels more like a political gimmick than anything that’s really needed.

Subsidize Low-Income Connections – $3.2 billion. This provides $50 per month to low-income homes to get a broadband connection. I’m really torn on this one. First, this seems like a big victory in that it’s the first time that the federal government has recognized that there is an urban digital divide. It still looks like the pandemic will be with us for much of this year and this funding can get broadband to homes that really need it.

But at the same time, this also feels like a giveaway to the big ISPs. For instance, Comcast already has a low-income program that provides inferior broadband for $9.95 per month. Does this bill let them bill the federal government $50 for that same program? I also worry that some of this money will go to DSL. AT&T doesn’t deserve a penny of this money after walking away from DSL in October. DSL in general should not be funded since DSL upload speeds are generally set at 1 Mbps or less – which makes the technology worthless for working or schooling from home.

I also worry about what happens when this funding ends. This could fund broadband to 10 million homes for six months or 20 million homes for 3 months and then the program will run out of money. What happens to these homes then? This is a lot of money to spend on a temporary program.

Infrastructure and Adoption in Tribal Areas – $1 billion. This is my favorite part of the funding package because this can lead to building a permanent broadband solution. But this funding has two caveats that could be gotchas. First, the funding can’t be used any place where other federal funding was already assigned. Unfortunately, the FCC has previously funded stupid solutions like Viasat satellite broadband in some tribal areas, and hopefully that can be ignored. This funding also comes with a ticking clock and needs to be spent by the end of 2021. If a broadband project is not already shovel-ready this is going to be a challenge to use.

Digital Inclusion in Minority Communities – $285 million. This money is being earmarked to historic black university and colleges, tribal colleges, and similar institutions. Again, this item seems to be a victory in that the FCC is finally recognizing that broadband has bypassed inner cities and tribal areas. This money could do a lot of good if it goes towards establishing permanent programs. But it also runs the risk of being wasted if the money goes to conducting studies instead of creating programs that will continue to help solve the digital inclusion gap.

FCC Broadband Mapping – $98 million. Everybody has been calling on the FCC to fix the damned FCC broadband maps. But as a consultant, this seems like an extraordinarily large amount of money to get this done. I’m frankly surprised that this couldn’t be done for a tiny fraction of this money – some handful of consultants are going to have a very good year.

Other Awards. Probably the best of the other awards is $300 million for rural infrastructure projects not covered by other specific awards. I would hope the NTIA will use this wisely and award broadband grants to areas that have been misclassified by the FCC maps as having broadband. There is also $250 million to bolster the FCC’s COVID-19 Telehealth grants. Hopefully, that money is mostly used to bring a permanent fiber connection to rural hospitals and health clinics.

Bottom Line. Overall, this funding is disappointing in that it doesn’t live up to the hype that hit the press the day after the funding was announced. But there are good things in here, and hopefully, some of this money helps to fund permanent solutions. But I feel like the money could have been used more wisely than for the big-ticket items like ripping and replacing Chinese electronics or of like overpaying big ISPs to provide low-income broadband. This doesn’t feel like we’re getting $7 billion of value.

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How Secure is Our Telecom Infrastructure?

The recent bombing in Nashville is a reminder that our telecom infrastructure is always at risk from terrorism or major natural disasters. The Nashville bombing is a telecom company’s worst nightmare where a deranged bomber parked a powerful bomb outside of the building with the express intent to wipe out the AT&T communication hub. We’ll have to wait to hear the full details of the damage done, but it seems that AT&T was able to restore most local service within three or four days.

We’ve had other major outages. The biggest came on 911, 2001 when terrorists knocked down the World Trade Center towers. This had a secondary impact of damaging the major Internet hub located across the street from the towers. This was a major Verizon tandem office along with being a CLEC hotel and a switching point for the Internet. The collapsing towers not only damaged some of the electronics at the site, but the continuing power outages eventually resulted in overheated equipment and continuing failures.

The third big disaster I recall was the Howard Street Tunnel fire in Baltimore in 2001. A rail crash inside the tunnel resulted in an intense fire that melted the fiber optic cables that delivered Internet traffic between Washington DC and the northeast corridor.

In addition to these major news-event outages, I’ve seen numerous smaller outages caused by hurricanes, floods, and tornadoes where telecom buildings and huts were largely obliterated. The most unusual outage I recall was when brazen thieves stole several miles of large copper wiring off the poles near Sugar Land, Texas.

Anybody who works in a telecom network understands how fragile the network is, at least locally. We do our best to hide electronics inside buildings or behind fences. We’re careful not to create maps showing the locations of key switching and fiber connection sites. But the fact is that a determined person that understands a network can do a huge amount of damage in a single night in most cities. They wouldn’t need a camper full of explosives to cause major damage.

We’ve come a long way since 2001 in planning ahead of time for major disasters. From what I’ve read about Nashville, AT&T brought in a few dozen temporary cell sites to restore cellular coverage quickly. In 2001 I recall that Verizon was proud about delivering a portable switch inside of a trailer – but it took weeks to restore phone service to the cables that hadn’t been damaged.

We’ve also become adroit at quickly switching traffic around damaged facilities. The 2001 tunnel fire destroyed fibers for which there was no alternate routing. Today, most carriers have multiple routing options and the ability to electronically divert traffic away from outages. We now have companies like Cloudflare and ThousandEyes which can react instantly to network problems and reroute traffic as needed. We had nothing like this in 2001.

But the Nashville bombing reminds us that we can’t forget about security when designing networks. I know of fiber networks where large OLT huts are sitting unprotected and open to the public – the network owner is largely counting on the fact that nobody knows what the hut is for. To save money and speed up construction we’ve changed from using concrete block buildings with secure doors to smaller and more fragile metal cabinets.

The damages in Nashville ought to be a reminder to network owners to review the physical safety of their network. Little steps like physical barriers like fences and hedges can make a difference. In today’s world, there is no reason not to have security systems with cameras and motion detectors that can notify law enforcement when somebody is visiting a hut in the middle of the night. We don’t need to be paranoid about security – we have hundreds of thousands of telecom sites that are safe and undisturbed day after day. But the Nashville bombing is a reminder that somebody with a grudge or a nutty idea can cause a lot of damage to our networks, which are a lot more fragile than we want to admit.

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Charter Increasing Broadband Speeds

Charter announced that new customers will now be getting 200 Mbps as the basic broadband download speed, increased from 100 Mbps. During the first quarter the company also will be increasing speeds for existing customers in seventeen markets including  Palm Springs, CA; Orlando, FL; Tampa, FL; Savannah, GA; Lexington, KY; Rochester, MN; Columbia, MO; Springfield, MO; Albany, NY; Buffalo, NY; Elmira, NY; Rochester, NY; Syracuse, NY; Chattanooga, TN; Tri-Cities, TN; Beaumont, TX, and Cheyenne, WY.

Like all of the big cable companies, Charter periodically increase speeds across the board. The company raised speeds in 2014 from 30 Mbps to 60 Mbps. In 2017 the company increased speeds to 100 Mbps download.

Charter will likely eventually increase speeds in most other markets, subject to technical capability. The company says it has implemented DOCSIS 3.1 technology nationwide, but overall system capacity can still be limited by other local factors such as the overall bandwidth of the network, the configuration of electronics, and the age and quality of the coaxial plant. Like all cable companies, Charter sells bandwidth that is ‘up to’ the advertised speeds and there will be customers in the upgraded markets that will get faster broadband but who may never hit 200 Mbps target.

Charter is upgrading major markets but seems to be going first to places where it has competition. Chattanooga has a citywide municipal fiber network. CenturyLink is in the process of building fiber citywide in Springfield, MO. The New York markets have Verizon FiOS while markets like Tampa and Palm Springs have FiOS provided by Frontier.

The company says it’s not increasing upload speeds with the upgrade. Most Charter markets we’ve studied have upload speeds between 10 Mbps and 15 Mbps for the 100 Mbps download product. During the pandemic, the number one complaint about cable company broadband has been the inability of multiple family members to make school and work connections at the same time. While moving to 200 Mbps will be welcomed by many homes, this upgrade will not change the ability to work from home.

One interesting way to look at the upgrades is that it’s a way to reduce network congestion. It’s unlikely that upgrading a customer from 100 Mbps to 200 Mbps per second is going to have much impact on customer usage – but downloads get done faster, freeing up the network. Faster speeds should reduce contention on the network during most times of the day.

The biggest losers from increased cable company broadband speeds are the telcos. The typical urban DSL speeds of 15 – 30 Mbps download look comparatively slower with each cable company upgrade. AT&T is the incumbent telco in some of the listed markets, and since the telco has stopped installing new DSL customers, faster broadband is going to be useful to lure even more customers from the obsolete AT&T DSL service. Unfortunately for customers, AT&T’s departure as a broadband option is handing a true monopoly to cable companies like Charter in markets where there is no fiber competitor.

I have to wonder where the cable companies will go from here. With DOCSIS 3.1 the cable companies can theoretically provide speeds up to a gigabit in most markets, depending upon local capacity limitations. Charter has been increasing speeds across-the-board every three or four years. With this speed increase Charter is now ten times faster than DSL, and from a marketing perspective allows the company to sound as fast as a fiber competitor (as long as nobody asks about upload speeds).

Charter is the most aggressive large ISP right now and is growing the fastest. This upgrade will give the company a big marketing boost. Charter is also expanding its footprint into areas surrounding its market, including accepting a grant of over $1 billion in the recent RDOF grant to bring broadband to rural areas. It’s good for the country to get faster broadband speeds, and I’m sure the FCC will somehow take credit for speeds getting faster (although they have no role in upgrades like this one).

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A Look at the Big Guys

You can’t put the telecom sector into perspective without looking at the performance of the biggest players in the industry. The pandemic has been an interesting year for both big ISPs and telecom vendors. Smaller ISPs should care about big ISP performance for many reasons. For many smaller companies, the big companies are the competition and strength or weakness of the big providers can foretell stiffened competition or increased opportunity. The big ISPs also drive the overall industry and impact the availability of everything from fiber, electronics, and available construction crews.

Comcast. The company’s financial results are interesting. Revenues for the whole corporation for 3Q 2020 dropped 4.8% compared to a year earlier, EBITDA dropped 11.3%, and net income dropped 37.2%. The big drops are due to the entertainment parts of the company and Comcast did well in the telecom space. The company added 323,000 new broadband customers in the third quarter but lost 478,000 cable customers. Telecom EBITDA grew by 10.5%, demonstrating the big difference in margin between broadband and cable customers.

AT&T. Revenues dropped 5.2% compared to the third quarter of 2019. AT&T did a good job of managing expenses and margins dropped from 22.2% to 19.4%. The company added over 1 million net new wireless customers. AT&T reported something that we need to remember about the whole ISP industry this year – it added 357,000 customers to fiber, but only 28,000 are paying customers. AT&T, like other ISPs provided some free connections for students and also is not disconnecting customers for non-pay. The company lost over 800,000 video customers, mostly at DirecTV, but is seeing good growth with AT&T TV and HBO.

Charter. The company weathered COVID better than most other telecom companies. Revenues were up 5.1% compared to a year earlier. This was driven by an increase of 850,000 broadband customers and an increase of 94,000 cable customers. Not all of the broadband customers are paying and the company claims 537,000 net gains in paying customers. Charter also added 363,000 cellular customers during the quarter.

Verizon. Revenues are down 4.1% compared to a year earlier. Overall earnings were down 4.3%. The company added over 400,000 wireless customers. The company added 144,000 net customers to FiOS fiber, the biggest quarterly gain since 2014. Unlike Comcast and AT&T, the company didn’t have a non-telecom business pulling down the bottom line.

Telco Vendors. There were mixed results for worldwide telco vendors. Capital spending by the big telcos dropped, resulting in overall lower revenue for many vendors. However, Huawei and ZTE revenues were up 26%, driven by the Chinese governments spending for 5G. All other vendors collectively saw a 1% drop in revenues for the quarter. Fujitsu revenues were up 12% for the quarter, representing continued big growth for fiber backhaul. Ericsson was up 9%, driven by 5G electronics. Intel was up 4%, driven largely by sales of smartphone chips. But other vendors weren’t so lucky. Corning revenues were down 4%. Cisco sales were down 6%, and CommScope sales were down 11%. Samsung was down almost 15%.

Upcoming Trends. Analysts predict some of the following trends for the big players in the industry:

  • Fiber buildout to small cells should pick up again in 2021 to pre-pandemic levels.
  • Sales of operating software will grow faster than sales of hardware.
  • Most big telcos are likely to reduce staff in 2021.
  • Overall capital spending is likely to grow around 4%, bringing the industry back to pre-pandemic levels.
  • Telcos will pause to investigate before stepping into open RAN.
  • While there will be continued spending on 5G infrastructure, there is no expectation of net revenue increases due to 5G technology.